Money in the hands during the youth is the greatest feeling of them all. However, not many people realize that their money today can be their riches tomorrow. Becoming wealthy/ financially free is a journey and investments are the highways to it. If those investments are delayed, our dreams of unimaginable wealth will take too long to come true. Let’s take a look at that happens when our money is spent unwisely and we delay investing it.
Age is actually an Advant-age!
When we are young, we have lesser money as compared to someone like our parents or siblings. But we have more time and an advantage that most of us are not aware of which is “time”. For instance, let’s assume you & elder sister recently attended a seminar wherein you learned the importance of investing money. Now you wish to start investing so that you have enough money to live your life your way by the time you retire. Because you’re young (22) and have just started earning, you start investing Rs.5000 per month whereas your sister whose elder to you (32) starts investing Rs.10000 per month. If both of you plan to retire at 60, who would have more money at 60? You or your sister?
Well in reality you will have more money that what your sister will have despite the fact that he invested double than what you did. This is the magic of compounding.
If you let it slip away, double or triple you’ll have to pay. When we’re young we often feel what’s the hurry to save. We can save later on, right now is the time to spend. But what we ignore is that the more time we loose the costlier it gets. For instance, let’s take the above example where you were making more money than your sister. Now your sister wishes to have the same amount as you will have, let’s see how much more she’ll have to pay.
She’ll have to start investing Rs.16,900 per month to accumulate the same amount as you do which is more than three times of your monthly investment. Sometimes keeping up with such savings can be exhausting and may give you sleepless night. As you grow old; you not only get a raise in the income; you also get a raise in your expense be it your family expenses, lifestyle expense etc.
A young risk appetite can digest come what may
The journey to a whooping wealth is not a linear path; it comes along with bumpy rides i.e. a lot of highs and lows during the investment journey especially in equities.
Our parents or grandparents have much higher responsibilities in terms of providing for our family, paying for loans, education, household bills and expenses. In that case, they can’t take so much risk investing money and often resort to safer options like debt funds, FD’s, RD’s etc. A young person can definitely take the risk of letting their money go through the bumpy rides that equities when you’re young you don’t have a lot of responsibilities and commitments.
Why get stuck with 4.5% when you could have even 15%?
This brings us to our final point – Investing money is far better than holding it in savings accounts. Having a saving account or multiple saving accounts is fine. But those accounts only give out a very meager percentage of interest, like 4-6%. Equity investments can get you much returns (you’ve seen that above already). With a savings account, you can just have reserves that can ensure you that you have money when you need it for your daily living.
But what would you do for the bigger expenses that may come your way such as buying your dream car, or your dream house or your kids’ education etc.
In conclusion, there are great benefits of investing early and more problems when investments are delayed. We hope you treat your money well and invest it early for a bright future.